ShareThis Page

U.S. bank earnings up nearly 13 percent in 3Q

| Tuesday, Nov. 29, 2016, 8:30 p.m.

WASHINGTON — Banks' earnings in the July-September period jumped nearly 13 percent from a year earlier as continued growth in lending fueled interest income.

The data issued Tuesday by the Federal Deposit Insurance Corp. showed strength in the banking industry more than eight years after the financial crisis struck. However, the impact of low oil prices on energy companies led banks to continue to post bigger losses on commercial and industrial loans. Some energy companies have struggled to repay loans, causing distress for banks in oil and gas producing regions.

The FDIC reported that banks earned $45.6 billion in the third quarter, up from $40.4 billion a year earlier.

Almost 61 percent of banks reported an increase in profit from a year earlier. Only 4.6 percent of banks were unprofitable, down from 5.2 percent in the third quarter of 2015 and the lowest percentage since the third quarter of 1997.

The FDIC said net interest income increased by $10 billion, or 9.2 percent, from a year earlier.

As a sign of a healthy banking industry, the interest income earnings were boosted by a $112 billion, or 1.2 percent, increase in lending in the third quarter. The largest increases came in mortgage lending and credit cards.

The volume of commercial and industrial loans that were written off in the third quarter jumped by $946 million, or 82.7 percent.

Despite the relatively strong quarter, the banking industry “faces continued challenges,” FDIC Chairman Martin Gruenberg said at a news conference. He noted the sustained period of low interest rates in recent years which has crimped banks' profit margins on loans.

Gruenberg added that “banks must position themselves for rising interest rates going forward.”

Since the surprise election of Donald Trump, long-term interest rates have climbed, propelled largely by investors' belief that his plan to cut taxes and spend massively on roads, bridges, airports and other infrastructure could ignite inflation. When they foresee rising inflation, bond investors demand higher long-term rates and pay lower prices for bonds.

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.